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In today’s briefing:
- Mapletree (MCT & MNACT) Response to SIAS
- Russia: MSCI/FTSE Flows in Case of Deletion
- HSCEI Dividend Futures: Stay Short the 2022/23 Steepener
- NIFTY50 Index Rebalance: Apollo Hospitals to Replace IOC
- Z Energy Scheme Meeting on 25 March, IE Opinion
- NIFTY Bank Index Rebalance: BOB to Replace RBL Bank
- NIFTY NEXT50 Index Rebalance: Zomato, PayTM, Nykaa Among the Adds
- Playtech (PTEC LN): A Nuanced Flutter
- ACS/Hochtief/CIMIC: Rationalization of Holding Structure
- LG Energy Solution: End of the One Month Lock Up Period & More Selling Likely Ahead
Mapletree (MCT & MNACT) Response to SIAS
- SIAS posed questions to both Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) (a.k.a. “MNACT”) about how the ratio was decided and deal appropriateness.
- SIAS also asked about whether the deal was absolutely necessary and whether MCT would change its mandate.
- MCT and MNACT responded with lengthy explanations, some of which didn’t answer the questions. That’s what we get til the end-March Circular. And that’s OK. The trade is the same.
Russia: MSCI/FTSE Flows in Case of Deletion
- Investment related sanctions by the US and UK Governments could lead to the deletion of some or all Russian equities from the MSCI and FTSE indices.
- Deletion from the FTSE All-World/All-Cap indices would result in an outflow of US$6.67bn, while deletion from the MSCI Standard/Small Cap indices would result in an outflow of US$15.74bn.
- The most selling will be on Gazprom PJSC (GAZP), LUKOIL (LKOH), Sberbank of Russia PJSC (SBER), MMC Norilsk Nickel PJSC (GMKN), Novatek PJSC (NVTK), Yandex (YNDX) and Tatneft PJSC (TATN).
HSCEI Dividend Futures: Stay Short the 2022/23 Steepener
- The HSCEI 2022 dividend futures are trading around our fair value. Larger than expected special dividends from oil and telecom companies could provide some upside.
- The HSCEI 2022/23 div steepener has dropped from -5 to -15 since our last Insight. We see further downside here and would look to add to shorts in the spread.
- With rising interest rates, higher inflation, higher oil prices, a slowdown could lead to a rapid repricing of dividends and there will be opportunities to buy back the spread lower.
NIFTY50 Index Rebalance: Apollo Hospitals to Replace IOC
- As expected, Apollo Hospitals Enterprise (APHS IN) will replace Indian Oil Corp (IOCL IN) in the NIFTY Index (NIFTY INDEX) after the close of trading on 30 March.
- The index methodology has been changed to make new listings eligible for index inclusion if they complete one month by the review cutoff date, down from three months earlier.
- Estimated one-way turnover is 0.63% and will result in a one-way trade of around INR 14bn. Passive trackers will have a lot to trade on the stocks.
Z Energy Scheme Meeting on 25 March, IE Opinion
- Caltex Australia (ALD AU)’s offer of NZ$3.76 per share is near the mid-point of the independent expert (IE) assessed range of NZ$3.54-4.07. We think that IE’s valuation approach is sound.
- The offer includes an adjustment mechanism to pay NZ0.055 cents per share for each calendar day the implementation date extends beyond 31 March, up to a limit of NZ10 cents.
- We think that the offer is attractive for Z Energy Ltd (ZEL NZ) shareholders. For a 30 June implementation date, the gross and annualised spread is 5.0% and 15.2%, respectively.
NIFTY Bank Index Rebalance: BOB to Replace RBL Bank
- Bank Of Baroda (BOB IN) will replace RBL Bank Ltd (RBK IN) in the Nifty Bank Index (NSEBANK INDEX) at the close of trading on 30 March.
- Index trackers will need to buy over 2 days of ADV on BOB while selling over 2 days of ADV on RBL. There will be capping changes too.
- Bank Of Baroda (BOB IN) trades cheaper than its peers on forward PE and price to book and could outperform over the near-term.
NIFTY NEXT50 Index Rebalance: Zomato, PayTM, Nykaa Among the Adds
- Inclusions are FSN E-Commerce Ventures (NYKAA), Mindtree Ltd (MTCL), Paytm (PAYTM), SRF Ltd (SRF) and Zomato (ZOMATO), while Indian Oil Corp (IOCL IN) moves lower from the NIFTY Index.
- Deletions are Aurobindo Pharma (ARBP), Hindustan Petroleum (HPCL), Indraprastha Gas (IGL), Jindal Steel & Power (JSP) and Yes Bank (YES), while Apollo Hospitals (APHS) moves up to the NIFTY Index.
- Estimated one-way turnover on the NIFTY NEXT50 Index is 10.24%, the one-way trade is INR 8,486bn and there is over 1 day of ADV to trade on a few stocks.
Playtech (PTEC LN): A Nuanced Flutter
- On the 2 February, Playtech Plc (PTEC LN)‘s shareholders voted down Aristocrat Leisure (ALL AU)‘s £2.1 billion Offer.
- The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.
- As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs – former and current – are piecing together a deal.
ACS/Hochtief/CIMIC: Rationalization of Holding Structure
- Hochtief offers A$22/share in cash, a 33% premium to the closing share price on the prior day, and the offer is final. The offer is a relatively low amount.
- The deal should complete. The premium is generous, as the 15.4x P/22e E paid is high given that Hochtief and ACS are trading at 9.9x and 11.3x, respectively.
- ACS trades at 27% discount to NAV. Holding structure rationalization and c. €5 billion received should be a catalyst for discount tightening. Long 1 ACS SM/short 0.4162 HOT GR.
LG Energy Solution: End of the One Month Lock Up Period & More Selling Likely Ahead
- In this insight, we discuss the end of the one month lock up period and more block selling ahead by major investors for LG Energy Solution in the weeks ahead.
- There are 1.75 million shares under the one month lock-up period, representing 0.7% of outstanding shares.
- At current price of 416,500 won, we believe there is an additional 11% downside risk to LG Energy Solution shares over the next 3-6 months (using the base case valuation).
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